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New Mortgage Standards Limit First Time Buyers

HI4-7-14By many indications, the housing recovery is still on the upswing. Mortgage rates remain on the low side and homes are available in most markets. So why aren’t first time buyers taking the plunge into homeownership? Changing financial situations and today’s tighter lending standards may be squeezing potential home buyers out of the market and creating a larger pool of candidates for rental housing.

Traditionally, first time homebuyers have tended to be young, secure in the workforce and ready to start a family. But today’s economic realities have changed that picture. More and more college graduates are leaving school with a burden of thousands in student debt – a phenomenon we’ve discussed in previous posts. That kind of debt makes recent grads reluctant to take on more debts in the form of mortgages. Not only that, defaulting on student debt damages the credit needed to qualify for a home loan.

Aside from student loan debt, an iffy employment picture means that some potential buyers simply don’t have the income available to swing a home purchase.. The new standards of the Qualified Mortgage Rule, which took effect in January 2014, require higher down payments and a lower debt to income ratio than previous loan standards. That means fewer first tie buyers, especially young people, may find it hard to qualify for a home loan in the first place.

What’s more the kinds of lower priced houses that are traditionally bought as “starter” homes re in short supply in some markets. Many current owners of t hose homes are still underwater with their mortgages or are unable to sell for other reasons, so the remaining houses available for sale may be priced out of a first time buyer’s budget.

Those low-cost, often foreclosed homes that firsts time buyers might be able to afford are also the target of barge-scale investors who can pay cash casino online for properties for a quick transaction that removes them from the market. That effectively shuts out would be homebuyers who may be ready to buy – but find no houses they can afford.

The absence of the first time buyer form the market affects the evolving housing recovery in several ways. The grown of the housing market then rests on refinancing, new home starts and investor activity, as well s the movement of larger homes for which there are no new buyers. And because potential first time buyers are either choosing not to purchase or are locked out of the process entirely, the pool of renters continues to expand – good news for become property investors following Jason Hartman’s recommendations for building wealth in real estate. (Top image:Flickr/rutio)

Read more from Heroic Investing:

Rental Markets 2014: What”s best For Investors?

Don”t Buy These 5 Investing Myths

The Heroic Investing Team

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